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Chart of the week: Rain falls on the bulls’ parade

When inflation is factored in to stockmarket gains, the markets still have some way to go before they reach record highs.

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The S&P 500, the world's most widely watched stockmarket index, hashit over 30 new record highs this year. The latest gains have propelledthe index above the 2,000 mark. But "it's time to pour inflationary rain onthe bull parade", as Gene Epstein puts it in Barron's.

If we factor in theloss of purchasing power investors have suffered owing to inflation, themarket still has some way to go to reach a record in real terms.

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The S&P 500 previously hit an inflation-adjusted, all-time high in March2000. Since then, US inflation, as measured by the Consumer PriceIndex (CPI), has climbed by almost 40%. Factoring that in transforms theprevious record to 2,124, notes Epstein, and the market is still more than5% below this milestone.

Meanwhile, the technology-heavyNasdaq Composite has done far worse in real terms since 2000;investors in the Dow Jones index, on the other hand, have managed tomake a small profit.

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